Tesla's Crossroads: Can the Stock Recover Amid Musk-Trump Feud?

The escalating feud between Elon Musk and Donald Trump has thrust Tesla into the heart of a political storm, with profound implications for its valuation, stock performance, and long-term strategy. As the world's most high-profile CEO turns his attention to political brinkmanship, investors are left to grapple with a simple question: How much is Tesla worth when its leader is distracted by a partisan battle?

The Feud Timeline: From Alliance to Abyss

The Musk-Trump partnership began as a mutually beneficial alliance. Musk donated $277 million to Trump's 2024 campaign and briefly led the Department of Government Efficiency (DOGE), tasked with slashing federal spending. But their bond fractured in 2025 when Trump signed his “One Big, Beautiful Bill,” a $3.4 trillion deficit-increasing package Musk called a “disgusting abomination.” Musk's subsequent creation of the America Party—a third-party challenge to Trump—sparked a war of words that has cost Tesla shareholders dearly.

Impact on Valuation: The Cost of Leadership Distraction

Tesla's stock has plummeted 25% since early 2025, erasing $150 billion in market cap. The root cause? A trifecta of risks tied to Musk's political pivot:

1. Brand Dilution: Tesla's favorability rating in the U.S. dropped to 32% by Q2 2025, with critics linking its EV subsidies to Musk's controversial alliances. Competitors like BYD and Ford are capitalizing, capturing market share in key regions like China.
2. Regulatory Uncertainty: Trump's threat to revoke EV tax credits (already eliminated in the bill) and tighten emissions regulations has spooked investors. The removal of $7,500 federal EV tax credits alone could cost Tesla $1 billion annually in lost incentives.
3. Operational Stumbles: Musk's focus on politics has delayed Tesla's $25,000 “Model 2” launch, a critical product to penetrate mass markets. Analysts at J.P. Morgan note Tesla's brand value has fallen by $280 billion since 2021, a “collapse unprecedented in automotive history.”

Market Positioning: Losing Ground

Tesla's global EV sales fell 13.5% year-over-year in 2025, with its China market share dropping to 15%—a stark decline from its 2020 peak of 25%. Meanwhile, Musk's feud with Trump has emboldened U.S. regulators. The EPA recently delayed approval of Tesla's robotaxi trials, citing “concerns about corporate governance risks” tied to Musk's political activities.

Regulatory Challenges: The Elephant in the Room

The most immediate threat is the loss of subsidies. Tesla's gross margins rely heavily on U.S. EV tax credits and California's zero-emission vehicle (ZEV) credits. If Trump's administration revokes these, Tesla's profit margins could shrink by 8–10%, analysts estimate.

Brand Loyalty: Can Tesla Stay Cool?

Tesla's “cult following” is fraying. A Pew Research poll in June 2025 found 42% of U.S. EV buyers now view Tesla as a “political brand,” down from 68% in 2020. This shift has fueled a rise in “reputation risk” for institutional investors, who fear consumer backlash.

Investment Considerations: A Contrarian's Dilemma

For investors, the question is whether Tesla's fundamentals—its $300 billion in revenue potential from EVs, energy storage, and autonomous driving—outweigh the Musk-Trump fallout. Key takeaways:

• Valuation Floor: Tesla's current price-to-sales ratio of 0.6x is near its lowest since 2020. Historically, it trades at 1.2x–1.5x during stable periods. A rebound to 0.8x would imply a $220 share price—20% above current levels.
• Contrarian Opportunity: Short interest hit a 52-week high in Q2 2025, suggesting bearish sentiment is overdone. If Musk can stabilize his political stance or Trump's threats fail to materialize, Tesla could rebound.
• Risks: A worst-case scenario—loss of subsidies, delayed Model 2 launch, and sustained regulatory scrutiny—could push shares to $150 by end-2026.

Final Analysis: Buy the Dip, but Set Traps

Tesla remains a structural winner in the EV transition, but its near-term path is clouded by Musk's political theater. Aggressive investors might dip toes in at $180–$190, with a $150 stop-loss to guard against further setbacks. Hold until the Musk-Trump feud resolves, and avoid if you can't stomach volatility.

In the end, Tesla's fate hinges on Musk's ability to refocus on running a $100 billion company—rather than running for office. Until then, investors are merely spectators in a high-stakes reality show.

Disclaimer: This analysis is for informational purposes only. Always consult a financial advisor before making investment decisions.